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Sat, 25 Apr 2015 11:14:33 +0200Sat, 25 Apr 2015 11:14:33 +0200Competition in the economic crisis: analysis of procurement auctionshttp://publikationen.stub.uni-frankfurt.de/frontdoor/index/index/docId/37359
We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions. Using data from Austrian construction procurements, we estimate bidders׳ construction costs within a private value auction model. We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 percentage points. We also find that without the government stimulus package this decrease would have been larger. These two pieces of evidence point to pro-cyclical markups.Klaus Gugler; Weichselbaumer Michael; Christine Zulehnerarticlehttp://publikationen.stub.uni-frankfurt.de/frontdoor/index/index/docId/37359Sat, 25 Apr 2015 11:14:33 +0200Does it pay to invest in art? A selection-corrected returns perspective : [draft october 15, 2013]http://publikationen.stub.uni-frankfurt.de/frontdoor/index/index/docId/32495
This paper shows the importance of correcting for sample selection when investing in illiquid assets with endogenous trading. Using a large sample of 20,538 paintings that were sold repeatedly at auction between 1972 and 2010, we find that paintings with higher price appreciation are more likely to trade. This strongly biases estimates of returns. The selection-corrected average annual index return is 6.5 percent, down from 10 percent for traditional uncorrected repeat sales regressions, and Sharpe Ratios drop from 0.24 to 0.04. From a pure financial perspective, passive index investing in paintings is not a viable investment strategy once selection bias is accounted for. Our results have important implications for other illiquid asset classes that trade endogenously.Arthur Korteweg; Roman Kräussl; Patrick Verwijmerenworkingpaperhttp://publikationen.stub.uni-frankfurt.de/frontdoor/index/index/docId/32495Mon, 16 Dec 2013 08:59:25 +0100The quality of price formation at market openings and closings: evidence from the Nasdaq stock markethttp://publikationen.stub.uni-frankfurt.de/frontdoor/index/index/docId/6188
Central counterparties (CCPs) have increasingly become a cornerstone of financial markets infrastructure. We present a model where trades are time-critical, liquidity is limited and there is limited enforcement of trades. We show a CCP novating trades implements efficient trading behaviour. It is optimal for the CCP to face default losses to achieve the efficient level of trade. To cover these losses, the CCP optimally uses margin calls, and, as the default problem becomes more severe, also requires default funds and then imposes position limits.Michael S. Pagano; Lin Peng; Robert A. Schwartzworkingpaperhttp://publikationen.stub.uni-frankfurt.de/frontdoor/index/index/docId/6188Thu, 29 Jan 2009 12:53:06 +0100Bidder behavior in repo auctions without minimum bid rate : evidence from the Bundesbankhttp://publikationen.stub.uni-frankfurt.de/frontdoor/index/index/docId/1729
A distinguishing feature of the ECB’s monetary policy setup is the preannouncement of a minimum bid rate in its weekly repo auctions. However, whenever interest rates are expected to decline, the minimum bid rate is viewed as too high and banks refrain from bidding, severely impeding the ECB’s money market management. To shed more light on banks’ underbidding, we perform a panel analysis of the bidder behavior in the repo auctions of the Bundesbank where no minimum bid rate was set. Our results indicate that neither bank’s participation nor the submitted bid amount is significantly affected by an expected rate cut. This suggests that abandoning the minimum bid rate might increase the efficiency of the ECB’s money market management.Tobias Linzert; Dieter Nautz; Jörg Breitungworkingpaperhttp://publikationen.stub.uni-frankfurt.de/frontdoor/index/index/docId/1729Mon, 29 Jan 2007 11:10:41 +0100